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Global Economy

Why share prices are rising despite the war

Yesterday there was still panic selling, today investors took action again as if nothing had happened: Ironically, on the day that Putin invaded Ukraine, the US stock exchanges closed well up – above all the technology-heavy Nasdaq with gains of 3.44 Percent. Yesterday's trading day also started in the USA with sharply falling share prices. But after US President Joe Biden's speech on new sanctions against Russia, the stock markets turned positive.

Sanctions against Russia could be much tougher

One possible reason: the punitive measures decided against Russia have not initially turned out to be so severe that they could also have a severe impact on the western economy. The economist Thomas Gitzel from VZ Bank points out that the oil and gas sector, but also the global payment processing system Swift, are excluded.

The signals from the USA also prompted investors in Germany to buy in the morning. Yesterday the DAX lost almost four percent after the initial shock of the Russian attack on Ukraine. Market expert Andreas Lipkow from Comdirect Bank explains this to tagesschau.de as follows: "Risk aversion means that institutional investors, in particular, step to the sidelines in confusing situations. This leads to pressure to sell, which triggers exaggerated downward valuations."

Further strong price fluctuations expected

If the market participants could then assess the situation a little better, there would be a counter-reaction – hence the current price recovery. However, Lipkow points out that the stock exchanges could slip again at any time depending on the report and the situation.

The capital market expert Robert Halver from Baader Bank also assumes that there will continue to be strong price fluctuations. In the current situation, Halver advises investors not to sell at this level anymore. When it comes to new investments, you should do what always makes sense: commitments should be checked for robustness and an intact business model. And so, after the shock of the war in Europe, investors have apparently bought shares in companies whose business models they believe in.

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